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This Looks More Like An inflation Plateau As CPI Remains at Enormous Levels

Posted Wednesday, May 18, 2022 by
Skerdian Meta • 2 min read

Both CPI measures increased in December

GBP/USD has been one of the most bearish pairs, falling around $16 cents from the middle of January, as risk sentiment has been pretty negative, which has benefited the USD as a safe haven and has sent risk assets down. Bank of England was the first to increase interest rates back in December, but that hasn’t helped the GBP. Although in the last several days we have seen a strong bullish move, with GBP/USD gaining around 350 pips which is more than all other major pairs.

Although, today we are seeing a reversal in this pair, which has given back more than 100 pips, despite the CPI inflation report surging higher in April, as today’s report showed. Consumer price index (CPI) inflation increased to 9.0% from 7.0% in March, which means that inflation is increasing further globally and settling around 8-9%.

GBP/USD Daily Chart – The Spike Followed by A Reversal Down

GBP/USD giving up gains despite higher CPI

UK April CPI Inflation Report

UK April CPI YoY +9.0% vs +9.1% y/y expected
March CPI was +7.0%
CPI MoM +2.5% vs +2.6% expected
Prior CPI MoM was +1.1%

Core CPI YoY +6.2% vs +6.2% expected
Prior core CPI YoY was +5.7%

UK CPI

That’s the highest consumer inflation rate in some 40 years and will add pressure to the BOE to act more aggressively, while having to balance out added worries on the cost-of-living crisis that is brewing in the UK. The numbers here won’t add to much comfort on that, as consumers will continue to feel the pinch of rising costs.

UK finance minister, Rishi Sunak, comments on today’s inflation numbers, saying that:

“Today’s inflation numbers are driven by energy price cap rise in April, in turn driven by higher global energy prices. We cannot protect people completely from global challenges but are providing significant support where we can and stand ready to take further action.”

Pretty words but it isn’t going to do much to help consumers in the UK who are battling against a cost-of-living crisis at the moment – one which could get worse in the months ahead even.